Tennessee Valley Authority headquarters and TVA logoThe first utility-scale solar farm will be built to power the Tennessee Valley Authority in Alabama by the sister company of another Southern utility.
TVA directors Thursday approved a 20-year lease with Next Era Energy Resources — an affiliate company with Florida Power & Light — to buy the power generated by an 80-megawatt solar farm planned on nearly 600 acres in Lauderdale County in Northern Alabama.
At the same time, the TVA board also agreed to spend $340 million to buy another combined-cycle, gas-powered plant in Mississippi.
The solar generation in Alabama, which New Era expects to begin operations by 2016, represents the biggest single solar generation site to be built in the Tennessee Valley. The federal utility currently gets about 108 megawatts of solar power and has another 202 megawatts of solar power under development from about 2,200 installations across its 7-state region.
The new solar farm will be built near TVA’s Colbert Fossil Plant, which TVA is retiring in 2016. Johnson said the location will allow the solar facility to take advantage of the existing transmission system.
TVA Chief Operating Office Charles “Chip” Pardee said the utility will pay about $61 per megawatthour over the life of the agreement, “which is very competitive with our other sources of power.”
The deal was approved by the TVA board even though one director thought TVA should open up such power purchases to more public bidding among solar providers and another objected to the fact that the solar power rates are being artificially held down by federal tax credits.
In her first meeting as a TVA director, Gina Lodge said she supports renewable energy but wanted to publicly bid the solar lease contract to ensure TVA got the most competitive deal. Lodge cast the lone vote against the solar plant lease.
TVA President Bill Johnson said TVA has received more than a dozen solar generation proposals “so we know the market pretty well.” TVA Director Marilyn Brown said she would have preferred a longer lease than the 20-year term negotiated with New Era, but she voted to approve the agreement to help bring more clean, renewable power to TVA’s power portfolio.
Even including the hydro power generated from TVA’s 29 power generating dams, TVA got only 13 percent of its generation last year from renewable sources.
TVA is buying the power from New Era because as a private company New Era will qualify for 30 percent investment tax credits under the federal tax code incentives for solar power. As a federal corporation, TVA does not benefit by such tax credits.
Johnson said as long as such federal tax credits are available for solar generation, it will be cheaper for TVA to buy power from other generators than to build its own solar facilities.
Peter Mahurin, a retired chairman of Hilliard Lyons Financial Services and chair of the board’s finance committee, said he objects to such tax credits. But he motioned for TVA to enter into the agreement with New Era since the price was so favorable and the generation will help TVA meet new EPA rules to limit carbon emissions.
Environmental groups praised TVA for the new solar agreement. Stephen Smith, executive director of the Southern Alliance for Clean Energy said solar power “is an important resource for our region’s economic and job growth and it needs to be more fully incorporated into TVA’s system.
“Alabama has tremendous solar potential, and we welcome this positive development,” he said.
TVA also agreed Thursday to buy the the 760-megawatt Quantum Choctaw combined-cycle power plant near Ackerman, Miss. for $340 million.
TVA has previously contracted to buy the power generated at the Choctaw plant, which was built seven years ago. The plant is owned by an affiliate of Quantum Utility Generation, which bought the plant about three years ago from GDF Suez North America.
Pardee said TVA budgeted $400 million to buy the gas plant, “but we were successful in our negotiations” to be able to acquire the plant at a lower price.
“We want to own rather than rent — that’s the story,” Maharian said.
Since 2007, TVA has built or bought five combined-cycle gas plants with 3,900 megawatts of capacity. In the past year, the agency has approved construction of two more gas plants to replace aging coal-fired plants.
Contact Dave Flessner at dflessner@timesfreepress.com or at 757-6340.